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Report No. 12

Chapter XI


Notes to clause 98

Sub-clause (1)-The following drafting changes have been made:-

1. Drafting changes made in the charging section for income-tax (section 3) have been followed in drafting this clause also. Thus-

(i) the word "year" has been replaced by "assessment year".

(ii) after the words "previous year", the words "or previous years", have been added,

(iii) the enumeration of various classes of assessees ("individual", "undivided family" etc.) has been replaced by "person",

(iv) a proviso has been added to deal with cases where tax is charged in the year of income or deducted in advance.

2. The words "save as otherwise provided in this Act" have been added to make it clear that the charging provision is subject to other provisions, e.g., provisions for rebates etc. Cf the words "in accordance with and subject to the provisions of this Act," in existing section 3.

3. The words "a Central Act" have been replaced by "any Central Act" Cf existing section 3.

Sub-clause (2)- does not need any comments.

Sub-clause (3).-The existing section deals only with the case of a firm assessed under section 23(5)(b). The more frequent case of a firm which is actually registered has not been treated elaborately in the section. The draft sub-clause sets out the position comprehensively.

The second proviso to existing section 55 is transferred to a separate clause1, under the group of clauses dealing with income not forming part of total income for super tax.

1. Draft clause 104.

Notes to clause 99

The changes made are consequential on the changes made in existing section 55, main para.

As regards earned income the language of the draft clauses, on the subject, will; suffice to exclude existing section 15A for super-tax1.

1. Vide draft clause 81 read with draft clause 102(2).

Notes to clause 100

This corresponds to the proviso (a) appearing below existing section 25(4).

The existing provision says that the provisions of section 25(3) & (4) shall not apply to "super-tax". The word "super-tax" has, in the draft, been replaced by the words "determination of total income" etc. which are more appropriate.

Notes to clause 101

This is new. Interest on income-tax free securities is chargeable to super-tax. It is fair that reasonable sums spent on realising such interest, and interest paid on money borrowed for investment in such securities, shall be allowed as deductions. (Cf existing section 8, 1st Proviso, earlier half.)

The provision becomes particularly necessary in the draft, because so far as the computation of total income or income-tax is concerned, the draft clause for section 8 contains an express prohibition against deducting such sums.1

1. Vide draft clause 21(ii) and (iii).

Notes to clause 102

Sub-clause (1)- Existing section 58(1) has, in the draft, been split up into two. The general rule that the provisions for income-tax shall apply to the charge etc. of super-tax has been stated in sub-clause (1), while the exceptions are dealt with separately in sub-clause (2).

The words "save as otherwise provided in this Act", added in the draft, point to draft sub-clause (2) and are also intended to make clear that there might be cases where a provision is applicable to income-tax only, e.g., existing section 49C(1).

Sub-clause (2)- Existing section 58(1) excludes several sections of the Act in relation to super-tax. Most of these sections are, in the draft placed neither in the Chapter on Income on which no Income-tax is payable or in the Chapter on Rebate and Relief of income-tax. It would, therefore, suffice to say that these two chapters do not apply for super-tax.

So far as sections not contained in these chapters are concerned, they have been mentioned in the draft sub-clause under discussion [except section 58G(2) as to which see discussion below].

Section 58G(2) has been mentioned in existing section 58 as one of the excluded sections. But really speaking, the substance of it applies for super-tax also. What section 58G(2) provides is that the accumulated balance in an approved superannuation fund shall be excluded from the total income and exempt from income-tax. This does not apply in terms for super-tax; but section 58G(1), earlier part, says that such balance shall be exempt from super-tax. This "exemption" from super-tax has, under the scheme adopted in the draft, to be treated as exclusion from total income1. Therefore the position regarding the balance in question is the same, both for income-tax and super-tax, when section 58G(2) is read together with section 58G(1), and there is no point in saying that section 58G(2) does not apply for super-tax.

1. See notes to draft clause 104.

The words "Save as expressly provided in the Chapter" are meant for cases where a provision in the super-tax Chapter (e.g., clause regarding exemption of donations from super-tax) expressly refers to the conditions specified in the corresponding clause for exemption from income-tax.

Existing section 58(2) will be dealt with in the Chapter dealing with Collection and recovery of tax.

Notes to clause 103

This clause, which is new, has become necessary in the scheme followed in the draft, which deals separately with income-tax and super-tax. The object of the clause is merely to facilitate the application, for super-tax, of certain provisions contained in the sections dealing with avoidance of tax. Those provisions, as reproduced in the draft, use the expression "income-tax" only and hence it becomes necessary to repeat them for super­tax.

Income-Tax Act, 1922 Back

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